Apple’s stock has not matched the explosive gains seen by Nvidia since the launch of ChatGPT nearly two years ago, but the tech giant is still making strategic moves to capitalize on the growing AI trend. Raymond James analyst Srini Pajjuri views Apple as a stable investment in the AI sector amid current market volatility.
According to Pajjuri’s recent research note, Apple’s strategic inclusion of AI features, known as Apple Intelligence, in its iPhone 15 Pro and the upcoming iPhone 16, is expected to spark a “multi-year upgrade cycle.” This anticipated cycle could drive significant earnings growth for the company. The iPhone 15 Pro, launched earlier, and the iPhone 16, set to debut this fall, are expected to be the primary vehicles for these AI innovations. Pajjuri’s optimism is reflected in his updated price target for Apple, which he has raised from $200 to $250 per share. This new target suggests a potential 15% increase from the stock’s current level of $216.81. Despite this positive outlook, the stock experienced a slight dip of 0.3% on Friday.
However, Apple is facing challenges, particularly in China, the world’s second-largest economy. The company’s market share in China dropped to 14% in the second quarter, according to Canalys, a technology market analysis firm. Notably, the iPhone has fallen out of the top five smartphones in the Chinese market for the first time. Competing Chinese brands such as Vivo, OPPO, and Huawei have been more aggressive in integrating technologies like Generative AI into their products and services, which could be contributing to Apple’s declining market presence in the region.
The decline in Apple’s market share in China highlights the urgency for the company to effectively implement and leverage its AI technologies to regain competitive ground. Until Apple provides concrete numbers on how Apple Intelligence impacts revenue, investors will be closely watching the company’s upcoming fiscal third-quarter earnings report. They will be looking for further details on iPhone sales in China and any additional insights from CEO Tim Cook regarding the company’s AI strategy.
In summary, while Apple’s stock has not seen Nvidia-like surges, the company’s investment in AI technologies and a multi-year upgrade cycle for its devices could potentially drive future growth. However, the ongoing challenges in China and the need to demonstrate the tangible benefits of its AI innovations will be critical factors in shaping investor confidence and stock performance moving forward.